Transgenic mice, expressing the dominant negative IGF-1 receptor (lysine to arginine substitution in the kinase domain) in skeletal muscle, developed severe insulin resistance in the muscle due to hybrid formation between the dominant negative IGF-1 receptor with the normal endogenous IGF-1 and insulin receptors. These mice, named MKR, soon developed insulin resistance in the liver and fat. Eventually they developed diabetes associated with abnormal insulin secretion from the pancreas. Treatment of the MKR mouse model with a fibrate, leptin and a beta3 adrenergic receptor agonist all improved the diabetic state and reduced the insulin resistance, especially in the liver. Thiazolidinediones and phloridzin failed to have the same effects. These findings suggest that lipotoxicity and not glucotoxicity is the main underlying pathophysiological factor. Thiazolidinediones failed to improve the insulin sensitivity, despite the fact that the serum levels of adiponectin rose. We therefore surmised that they may be adiponectin-resistant and gave the mice acute and chronic adiponectin injections; indeed they did not respond even though adiponectin knockout mice and ob/ob mice did respond to these injections. Thus, this model of Type 2 diabetes is unusual since it deomonstrates high levels of adioponectin and adiponectin resistance.